By Andrew Gomes
Copyright staradvertiser
A lack of water at least partly due to drought doomed one of the most prestigious annual sporting events in Hawaii for 2026, but a conflict over the price of water also appears rooted in the recent cancellation of a professional golf tournament worth $50 million to Maui’s economy.
Contention over the water supply was aired in a recent lawsuit filed by the owner of two golf courses, three homeowners associations and a farm in Kapalua alleging that Maui Land & Pineapple Co. inexcusably failed to provide them with sufficient irrigation water amid drought conditions due to poor upkeep of its system that conveys water from the mountains to customers below.
The complaint, however, doesn’t mention a dispute over water rates, which began to simmer a year ago and fairly quickly led to lawyers representing MLP and the owner of the golf courses exchanging contentious letters.
This clash over water pricing, between the golf operation headed by Japanese billionaire Tadashi Yanai and a more-than-century-old kamaaina company majority owned by Hawaii-born billionaire Steve Case, appears to have influenced the cancellation of The Sentry, a signature PGA Tour event that was to have been held Jan. 5-11.
Documents filed with state utility and water resource regulators explain the discord touched off a year ago by a 400% rate hike.
MLP let Yanai’s TY Management Corp. know in August 2024 that factors including drought conditions and irreparable water system damage caused by heavy rains associated with Hurricane Lane in 2018 were anticipated to result in reduced water availability.
On Sept. 12, 2024, MLP informed TY Management in a letter that the cost per 1,000 gallons of water would be jumping to $2.45 from 49 cents starting Nov. 1, 2024, due to higher projected operating costs for the delivery system over the coming year.
In addition, MLP was imposing a new “transmission fee” adding 5% to TY Management’s water bill.
Alex Nakajima, general manager of TY Management affiliate Kapalua Golf and Tennis, replied in a Sept. 24 letter with questions about the higher projected operating costs, and whether they were expenses that could be passed on to TY Management under water delivery agreements with MLP.
The water delivery agreements were arranged as part of MLP selling the Plantation Course, which hosts The Sentry, and the Bay Course at Kapalua Resort to TY Management in 2009 and 2010 for $50 million and $24 million, respectively. Initial water rates were set at 32 cents per 1,000 gallons with a provision to rise with inflation.
At the time, MLP was trying to pay off a crushing amount of debt to remain solvent in the wake of downturns in the real estate and tourism industries. MLP also closed its pineapple plantation in 2009 amid financial challenges, and since then has largely sustained itself by selling assets and leasing farmland and commercial real estate to tenants.
MLP’s irrigation water system was developed over 100 years ago by MLP and Pioneer Mill Co. to divert water from Honokohau Stream to drier lands for pineapple and sugarcane irrigation. The system, sometimes referred to as the Honokohau Ditch system, includes 7 miles of mainly tunnels connected to reservoirs, gates and other infrastructure.
The system provides nonpotable water to Maui County and to Kapalua Resort, which MLP developed on former pineapple plantation lands. Water from the system also feeds fire hydrants in the area and is supposed to sustain minimum flows through streams that support wildlife and other users including taro farmers.
Justification debated
MLP said its goal is to break even financially on operating the system, but TY Management questioned whether the rate hike was proper under its delivery agreements that allow MLP to pass on costs for operating and maintaining the system but not for “capital improvements, replacements or repairs.”
MLP had previously asked TY Management to amend its water delivery agreements to cover the excluded costs, but to no avail.
“Based on a review of the Water Delivery Agreements, and as discussed in more detail in this letter, it appears that MLP has not complied with the requirements for the implementation of the proposed rate increase … ,” Nakajima said in his letter.
MLP CEO Race Randle responded to Nakajima in an Oct. 23 letter providing a more detailed breakdown of projected maintenance cost items for the ditch, gates, reservoirs, roads, trails, vegetation, administration and other things.
After a subsequent in-person meeting between the two sides, Robert Strand, an attorney at Carlsmith Ball LLP representing TY Management, sent a letter Oct. 31 to Rick Kiefer, an attorney at Cades Schutte LLP representing MLP, to further contest justifications for the rate hike and whether costs were being allocated equitably among all customers.
On Nov. 29, MLP informed TY Management that it had reassessed cost estimates allocated to customers, and that a new reduced rate of $1.68 per 1,000 gallons of water would be effective Jan. 1.
MLP explained that the scaled-back rate was primarily due to Maui County, which was paying 30 cents per 1,000 gallons of water, agreeing to pay for higher operating and maintenance costs under its water delivery agreement that previously excluded such coverage.
“We appreciate your understanding of the need for MLP to implement this rate adjustment to ensure the water system receives sufficient funding necessary to operate,” Wade Kodama, MLP’s chief financial officer, said in the letter.
Still, TY Management regarded MLP’s explanation of the cost spike as insufficient, according to a Dec. 9 email from Strand to Kiefer that also said the state Public Utilities Commission should evaluate the reasonableness of the hike.
The PUC regulates potable water utilities, but not entities delivering irrigation water under private agreements, which led the commission to reject a Dec. 11 request by TY Management for the PUC to regulate MLP’s water system.
TY Management returned to the PUC March 5 by filing a complaint seeking regulatory relief, which remains pending.
In the PUC case, MLP noted that its proposed $1.68 rate for TY Management is less than what the county Department of Water Supply charges for 1,000 gallons of nonpotable water, $1.80.
Well water plea
Amid the dispute over water pricing, TY Management asked MLP to provide potable well water for golf course irrigation to supplement cutbacks on ditch water due to drought.
Under the water delivery agreements, MLP has an option to provide water from its wells during times of insufficient supply from the ditch system. But MLP initially said this wasn’t authorized by the state Commission on Water Resource Management.
On June 20, MLP informed TY Management that it may be able to provide a limited amount of emergency well water sufficient to maintain functionality of the Plantation Course needed to host The Sentry and prevent significant job losses, but only if TY Management agreed to conditions.
Conditions included paying the $1.68 rate effective June 1, withdrawing the PUC complaint and not engaging with the county or state water commission on MLP water system matters.
“We are only open to performing the effort required to do this if it will end the various conflicts between us,” Randle said in an email to a TY Management representative.
The price for the well water would be what it cost MLP to supply, according to Randle’s email, which also noted that the Honokohau Ditch system had been damaged significantly by storm events and landslides, “and is now experiencing minimal water levels.”
Two months later, on Aug. 18, TY Management sued MLP with other plaintiffs.
Last-ditch efforts
Randle, in an Aug. 25 email addressed to Yanai, reiterated MLP’s offer and conveyed a water commission authorization to supply TY Management with emergency well water, while expressing hope that TY Management and other plaintiffs would dismiss the litigation.
“It is our hope to find a path forward for all stakeholders in our community and our shared future,” Randle wrote.
TY Management closed the Plantation Course Sept. 2 after struggling with water cutbacks and cutoffs for over a year.
On Monday, the Bay Course was closed indefinitely.
The two courses employ about 150 people, according to a company representative.
On Tuesday, the PGA Tour announced that The Sentry would not be held as scheduled in January. In addition to an estimated $50 million economic boost for Maui’s economy, the PGA Tour and partners delivered $747,704 to local nonprofits at last year’s event, according to title sponsor Sentry Insurance.
State officials have been exploring whether another Hawaii golf course can host The Sentry in January, but that’s a challenging prospect given PGA Tour standards and logistics.